Purchasing a family home is usually the biggest financial transaction most adults make in their
lifetime, but some people actually get to buy a second home. A vacation home can be a really
nice investment. If the property value goes up over the years, you can profit from that.
In the meantime, you've got a place to get away to whenever you want, and, hopefully, you'll
make some great memories there. You might even rent it out when not there. Still, it's a huge
expense, and it's another home you have to maintain. Knowing what you're getting into is
1. Do the Math
U.S. News strongly recommends you do the math involved with all of this. Can you afford it
now? Can you afford it in the future? You have to factor in mortgage payments, for sure.
However, you also have to account for homeowners insurance, potential HOA fees,
maintenance, repairs, and property taxes.
You also need to consider the expenses involved with getting back and forth to the property and
returning to your primary residence. You'll have to take care of all this after your own home,
groceries, bills, caring for your family, and saving for retirement.
2. Analyze Your Financing Options
LinkedIn says that even after you do a budget, you need to consider your financing options. If
it's a second home mortgage, then that's going to be harder to get than a primary residence
loan. Lenders consider them to be bigger risks. As such, your down payment is going to be
They might ask you to put down 25% to 30%. Some even want as much as 50% down. Your
interest rates are also going to be higher. There is good news, though. Tighter requirements and
higher costs narrow down how many qualified buyers there are on the second home market.
Preapproval will help you make solid offers for vacation homes.
3. Be Open to Building
Checking the available market of existing vacation homes is the best place to start. However, it
might not be your only option. Have you considered buying a piece of undeveloped property and
then building on it?
For instance, if you want a vacation home in Texas, then you can either buy a current home in
the state or you can buy a piece of Texas land and build on it. The state of Texas is one of the
biggest in the country, and there's a lot of land yet to be bought or built on. Something here
might be waiting for you where you can build a vacation home just like you want it.
4. Consider Having Local Help
Fool suggests keeping in mind that a vacation home might have one expense your primary
residence doesn't, and that's having locals help take care of the place. Someone has to be
responsible for potential emergencies.
You may not be a practical option if you're too far away. If you decide to rent it out when you
don't use it, you can make money off of it, but you might want someone local to handle
cleanings between visits, landscaping, maintenance, and even arranging renters. A property
manager might make sense.
5. Is It Actually Worth It?
As alluring as a vacation home can be, you need to decide if it's going to be worth it. Will you
honestly get there enough to truly enjoy the expense and trouble associated with buying and
Might you potentially balance your schedule against renting it out? The potential rise in property
value might help you save for retirement, but it can't be your only plan for getting that actually
While buying a vacation home might seem luxurious, you don't have the luxury of skimping on
the process. Even if it's a place to go, unwind, and relax, you need to put just as much into
finding and buying one as you did your own primary residence. You'll likely be taking on a
second mortgage and be responsible for property maintenance from afar. Having a landlord or
property manager local to your vacation home might make sense.